VIEW FROM VEDOMOSTI:Nurtured by Tolling System, Russian Textiles Set to Boom




It has seemed for years that the Russian economy was nothing but heavy industry and a bunch of mafia-connected bank-like structures.


Well, maybe there were a couple of progressive food processing companies, too.


All you could read in the Western press about Russian light industry was that "in the Soviet Union, scores of factories put out goods people did not need."


In the Russian press, coverage was limited to mass strikes in cities like Ivanovo, where the textile industry is the core of the local economy.


It was a fact that no one wanted Ivanovo cloth because no one wanted Russian clothes if they could buy imported ones.


Now, there are posters around Moscow portraying a glamorous woman who proclaims: "I can afford anything but I wear Russian clothes."


Russian clothing producers are back, and I am not talking about a bunch of Russian designers who either produce goods in boutique quantities, like Slava Zaitsev, or order abroad like Alexei Grekoff.


The woman in the poster might, for example, shop at Marks & Spencer in London for Russian-made clothes bearing the Berghaus label.


The Dutch fashion company places orders with Russian factories and then exports the finished products to the West. In Russia, though, it prefers to sell Asian-made clothes.


An even funnier example is Steilmann, the German fashion house that has had stores in Moscow since the early '90s.


The Germans order clothes in Lipetsk in southwest Russia, export them, then bring them back in and sell here, according to the director of Lipchanka, the factory that sews the smart Steilmann suits.


Few people realize that these Western-looking clothes with a Western label are not really imports.


It is astonishing, but customs figures show that Russia exports outside the former Soviet Union six times the number of suits, trousers and skirts and eight times the number of women's coats that it imports.


Of course, the Economics Ministry estimates that 80 percent of Russia's imports go undeclared, but even taking that into account, the export of certain wearables exceeds the import. Russia dresses the world?


It would be an exaggeration to say that, but not an impermissible one.


Western fashion companies work with Russian factories under tolling schemes, providing cloth, thread and other materials, paying a processing fee and then selling the finished products on their own behalf.


Tolling, far from "robbing Russia" as another recent series of billboards proclaimed - mostly regarding the aluminum industry - has allowed Russian tailors to survive a period of popular disenchantment with their products.


At the same time, Russian factories, which in Soviet times indeed produced stuff that few people wanted, have retooled and started following fashion trends.


The quality of their products has also vastly improved.


The kind of tolling used in the clothing industry does not fall under the ban on internal tolling imposed by the Russian government starting this year.


Imported rather than domestic materials are used, and that is legal under Russia's customs code.


So the factories can go on sewing brand-name clothes for Western chain stores.


But they also want to make their own lines for the domestic market, which after the 1998 crisis has actively sought quality local products to replace imports.


Once local producers pile up enough working capital to use a sizable part of their capacity in production for the local market, the Russian clothing and fashion industry will be as attractive to investors as the food industry has become in recent years.


No one is surprised any more at major Western companies buying up breweries in Kaluga and Omsk.


Soon sewing factories in Lipetsk and Yegoryevsk will be on the market.


The next step will have to come from the textile industry.


Producers know they can get cheaper materials domestically, it's just that textile factories need serious investment.


And there is no doubt they will get it, which is bad news for Turkey and China, countries that have flooded the Russian wholesale markets with cheap sweaters and dresses in recent years.